Here’s a formula to help you evaluate.
Leaders of business-to-business (B2B) companies often wonder if the cost of marketing is going to be worth the rewards. They wonder what kind of return they will get if they implement a full marketing plan that goes beyond the basic minimums of marketing. For most B2B companies, who have traditionally relied on sales people to generate revenues, it’s difficult to determine how the investment that marketing entails will deliver the results that will make all the work pay off.
Measuring the results of marketing is tough. In some ways, marketing is like IT. It involves a specific investment in tools, technologies and people. But the results come through many avenues and channels. So the expense is easy to see and measure, but the returns are less specific and less easy to measure. That’s one of the factors that causes B2B marketing to be easy to argue against, and tougher to argue for, at least on a tactical level.
This fact holds a lot of smart B2B companies back from marketing. But that’s a mistake. More and more B2B companies implement strategic marketing every year – which means those who don’t get left farther and farther behind.
If your company is thinking about marketing but is having a hard time coming up with the math to make the business case, here’s a way to generate some supporting quantification.
Here’s what one group of B2B company CEOs recently identified as the potential increase in revenues due to marketing in their own specific businesses (the range is from 21% to 155%):
Marketing adds value to a B2B company in diverse ways. Finding the specific ways that your business will achieve results from marketing will help you quantify the impact of marketing, so you can make a business case for it.
Here are four specific areas where marketing can deliver results for B2B companies. For each area, consider the impact that marketing can have for your business – some areas will yield stronger opportunities than others.
1. Share of wallet (increasing revenues and profits from existing customers).
Do your existing customers know about your full product line? Could they be buying more from you that the one product or service that they currently buy? Most B2B companies believe that their customers have a limited understanding of their full product line. Marketing is the tool by which companies can raise awareness of their full product and service line to their existing customer base.
To quantify the impact that marketing can make in this area for your company, consider the potential lift to your revenues that your business could achieve if customers knew about your full product or service line. Could you generate 5% additional revenues? 10% additional revenues? 25% additional revenues?
Jot down the percentage that you think you could achieve here. Be realistic. Some companies have a big opportunity here and some companies have a minimal opportunity.
2. External ImagE.
Does the image that your company presents in the market accurately portray the business? Does it reflect the quality and integrity of the services you provide, the experience of your team, and the benefits that you deliver?
Put another way, does your market image prevent you from getting business?
Here’s a real example to illustrate this: a small consulting company was networking among executives in national banks in order to generate business for their operational strategy services. The principals of the consultancy were well-respected and highly experienced. But the company’s online image was weak – their website looked amateur and outdated. As a result, the firm rarely got invited into the banks to speak with larger groups of potential customers. After overhauling their website to portray a more sophisticated image, the consultancy got significantly more traction. What changed? One of their contacts relayed that she was now happy to introduce the firm to others in her organization, but she couldn’t previously because of how they’d be perceived based on their website.
Is a weak external image an issue for your company? Is it holding your back from getting new customers?
If you were to elevate your company’s image in the market, could you bring in 5% more revenues, 15% more, 40% more?
Jot down the percentage that you think you could achieve here.
3. Market awareness.
Are you the best kept secret in your industry? Do all the companies and professionals who could be doing business with you know about you?
This is a major area of opportunity for many B2B companies. They might be fantastic at what they do, but no one knows they exist.
If you were to increase awareness of your business through marketing so that more potential customers know about you, what could that mean for the business? A 10% lift? A 100% lift?
Jot down a realistic estimate here.
4. Lead generatioN.
Does your phone ring or leads come in via web requests? Do you do any activities to promote your business and generate interest in the services and products you provide?
Every company deals with an increasing level of competition, and if your competitors are doing a good job of lead generation, it probably means that your business is suffering from declining inquiries. If you were to implement lead generation initiatives, could you increase your pipeline by 10%? 40%? More?
Jot down a realistic percentage here.
Tally up the percentages to quantify the potential impact of marketinG.
This list outlines 4 tactical areas that marketing adds value for B2B companies. When you tally the percentages, what’s your number? I recently took a group of 20 CEOs through this exercise. As you saw in the photo above, the increased revenue that they estimated for their individual companies varied between 21% and 155%. On average, it was 55%. So for a $5M business, that represents an additional $2.75M in revenue. For a company with a 15% gross margin, that’s an additional $400,000 in profit.
Should your company invest in marketing in order to achieve revenue growth? What kind of investment level makes sense? I hope the exercise above helps you quantify the impact that marketing can have.